McCain, Obama, & the declining middle class income

Recently McCain and Obama offered opinions on the declining middle class income by which, from the NPR story, I gather means the overall decline in earnings relative to buying power.

McCain’s solution was more tax cuts. Obama wanted to tax the upper income tiers more to fund government programs. At least that’s what I got from NPR.

Starting with McCain, one wonders why he thinks the solution to this problem is tax cuts. We’ve been doing a lot of that already and, as far as I can see, to no appreciable result. If I made 30K a year, I still make 30K a year and that 30K buys the same as the other 30K except I have an infinitesimally greater amount of it to spend, so I suppose I can buy more. Still, this approach only works if the government can manage to spend less at the same time. If it doesn’t; if the government continue to spend like it was getting the old revenue amount then all that happens is the government goes into debt and debt creates interest. Eventually, the government will have to pay off the debt plus interest and that will probably have to come from taxes. I realize the advocates of tax cuts believe that the extra money being spent will increase the economy so that we can make up the difference, but I don’t believe it.

Obama’s plan makes even less sense. I fail to see how putting upper income money into programs (ultimately programs for the lower income bracket) solves a problem of the middle income bracket having declining purchasing power after inflation. Does it make goods cheaper? No. If anything, it will make the companies paying these taxes have to raise prices faster which actually DIMINISHES the middle class’s purchasing power faster. Does it give more money to the middle class? No. It provides services (not purchasing power) to those who qualify which is usually not the middle class.

I don’t like either approach. If you want to increase purchasing power then you need to either add money to the purchaser or lower the cost of the items being purchased. Between these two, I choose the McCain plan. At least that way, even if the problem is not being solved, I am getting a bit more money.